Milk & Eggs And Bottom-Lines

Today’s edition of the WSJ has an interesting article about online grocery sales that include both home-delivery and parking lot pickups.

The article is a lead one on the second section headline page.

Every morning I have some great conversation with fellow professionals as I sip on my coffee and eat my morning bagel. The Jewish deli where I go is an icon in the heart of Buckhead-Sandy Springs. It sits in one of the wealthiest ZIP Codes in the U.S. and the folks that I have highly engaged dialogue with are top corporate players at the likes of IHG, Home Depot, Carter’s, Southern Company and Simmons-Serta.

A top syndicated consumer radio commentator that is on many news-talk networks across the U.S. is also a regular with the group.

Just last week we had a great conversation about grocery stores and online ordering.

Our takes of the industry are only further confirmed when you read below the headlines of a the article running in today’s WSJ.

That article includes a chart that shows the percentage that online sales represent of overall grocery store sales in 2019… 6.2%. Three years out from now, the graph charts out what looks like a record increase with the caption… “online sales rose 15% in 2019.”

When you read the copy, it turns out that the projection for 2022 hits a “record high” of 8.1%… a record setting 31% increase!!!!

Wow. Be still my heart.

Many of the fellow professionals have retail backgrounds. They are very quick to cite that the profit margin at grocery stores is limited… very limited… and remains limited despite any hoopla about the category as we enter into 2020.

What appears to consumers as a small convenience charge for delivery or drive-up pickup, represents big new earnings that drop to that bottom-line for the grocery store “owner.”

Hence, the initial high driving the new addiction.

The WSJ has a copy line buried on page 2 of the article.

It states, “projections for the category signal profitability in four years.”

I have cited this “state of the digital grocery category” multiple times.

As of today as we are quickly entering into 2020, no one… nano… zero… zip… of the grocery store brands and digital grocery delivery services are making any profit.

One of the bibles of the retail trade, Chain Store Age or CSA, ran a top headline article just three weeks ago titled, “Online Grocery Delivery Boosts Revenue, Not Profit.”

It too cites the online sales rising 15% in 2019 vs. the sales level in 2018… but LOL, they then add the line that the sales were 30% above the projected level of sales.

Journalists LOVE using those percentages!

But it goes on in the next paragraph and cites that “to-date, no brand has yet to make the digital business profitable.” It even further states, “that factors like third-party delivery, click & collect, and curbside service, have all negatively impacted grocery retail profit margins.”

And then it adds that “75% of the retailers are actually seeing the average size orders shrinking.”

My breakfast professionals — old and young — very quickly cite that Millennials forming families is a factor that many in the digital world of numbers do not fully factor into projections.

Two of the folk that served as CFOs, note that the overall cost-of-distribution factors are hitting players like Amazon and E-Bay and even historic retailers like Target and Walmart in relationship to their bottom lines.

As we enter into 2020, the digital world just might have to go through dtox.

Just as we discussed over morning bagels, the grocery store industry very much so needs to be admitted into a dtox program… and digital is not the only condition bringing them there!

Two years ago, I listed one of the Top 10 Trends affecting what was then 2018 was the market entry of Millennial Families. Last year, in 2019, it was the lead Trendcast.

In 2020, not only will Millennial Families drive the market place, it will be Millennial Families with the additional factor of “settlement” that will enhance the Millennial factor.

The suburbs are changing as the Millennials re-settle and hang their family names on the front porches.

As kid #1 and now kid #2 come into the homesteads, a new “mega-trend” of “settlement” is going to re-shape and re-define everything from grocery stores to banks to doctor practices to hardware stores to digital websites and social media.

Also in today’s WSJ is a headline article on the front page that the Federal Trade Commission is exploring the possible future break-up of Facebook… not too unlike what happened in the past with AT&T and might soon happen to AT&T all over again.

As many of you reading this take time to celebrate the Holidays, step back and recognize that what you hear and read and see and attend about the future of the marketplace is interesting… but also unlikely to emerge in the format many paint.

As we enter 2020, I believe that we will see some very innovative concept ideas emerge — many of which will seem to be “old-fashioned” at first.

The idea of a local “mom & pop” grocery store where neighbors nearby actually know the store owners and visa-versa… where the neighbors living nearby can call in — notice that I did not say text-in — and ask what types of meats arrived for the day… where standards like milk and eggs are actually delivered multiple times of the week and placed in an insulated box left out by the front door… actually is something that we will see emerge and will not surprise me.

Shoot… those on Wall Street and Madison Avenue… those residing in the Silicon Valleys of California and Boston… those living in the bubble-dom worlds of Washington and Manhattan, might even dismiss the concept ideas.

But in my close to 40 years working my profession of embracing the marketplace and sitting down and engaging in conversation with consumers, I see times when what is being predicted is unlikely and what is being sensed instead become the undercurrent of massive change.